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FSA publishes policy statement on the approved persons regime

The FSA has confirmed an extension of the approved persons regime for those that perform a ‘significant influence’ function at firms. The details are contained in its Policy Statement 09/14. In its Supervisory Enhancement Programme, the FSA stated that it would place greater emphasis on the role of senior management, including non-executive directors (NEDs). This policy statement confirms changes to the approved persons regime to strengthen the FSA’s controls over persons likely in practice to exert a significant influence on a firm.

In particular, the FSA has:

Extended the scope and application of CF1 (director function) and CF2 (Non- Executive Director) to include those persons employed by an unregulated parent undertaking or holding company, whose decisions or actions are regularly taken into account by the governing body of a regulated firm.

Extended the definition of the significant management controlled function (CF29) to include all proprietary traders who are not senior managers but who are likely to exert significant influence on a firm.

Amended the application of the approved persons regime to UK branches of overseas firms based outside the EEA.

The original proposals included clarifying the role of NEDs to make it clear that the FSA will look at NEDs more closely where it believes they should have intervened more actively within a firm’s management. However, the FSA now plans to consider the relevant recommendations of the Walker Review and the Financial Reporting Council’s review of the Combined Code. The results of this consideration will therefore be included in a further consultation paper on governance which the FSA expects to publish in Q4 2009.

Graeme Ashley-Fenn, director of permissions, decisions and reporting division, said: "It is important that directors and senior managers at firms understand their regulatory obligations and have the relevant competencies and experience to carry out their roles with integrity.

“Since October 2008, the FSA has carried out 115 interviews for ‘significant influence’ posts at high impact firms. Nine applications have been withdrawn as a result. Once in post, where individuals fail to meet the required standards the FSA will consider enforcement action." These changes will come into effect on 6 August 2009 with a transitional period of six months. Firms should now begin assessing which individuals require approval and submit timely applications to comply with the end of the transitional period.